Prioritizing the agility strategies using the Fuzzy Analytic Hierarchy Process (FAHP) (case study: Hospitals)

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1 Prioritizing the agility strategies using the Fuzzy Analytic Hierarchy Process (FAHP) (case study: Hospitals) Seyed Faramarz Ghorani PhD student of product management and Operations, University of Allameh Tabataba'i, Faculty of Management, Tehran, Iran Dr. Maghsoud Amiri Professor, Department of Industrial Management, University of Allameh Tabataba'i, Faculty of Management, Tehran, Iran Dr. Laya Olfat Associate Professor, Department of Industrial Management, University of Allameh Tabataba'i, Faculty of Management, Tehran, Iran Dr. Abolfazl Kazazi Associate Professor, Department of Industrial Management, University of Allameh Tabataba'i, Faculty of Management, Tehran, Iran. Abstract: This study aims at identifying and prioritizing the agility strategies of organization through the Fuzzy Analytic Hierarchy Process (FAHP). This research is applied in terms of investigated objectives, has the descriptive-analytical type in terms of data analysis, and uses the survey method for data collection. The statistical sample consists of 223 top and middle managers in active hospitals of medical science universities affiliated to the Ministry of Health and Medical Education in Tehran Province. In this study, the descriptive statistics including the demographic data of statistical sample such as the tables of frequency distribution, descriptive charts, etc are utilized for data analysis, and also the inferential statistics by FAHP applied for weighting the options. At the first stage, the agility indices of organization are prioritized through the Fuzzy Analytic Hierarchy Process (FAHP). The results indicate that the competence is the most important criterion of organizational agility. At the next stage, the strategies are prioritized in each dimension of agility in the organization. The final weight matrix is obtained from multiplying these two matrices by each other. The results indicate that human resource management strategy is the most important strategy of organizational agility Keywords: Organizational agility, strategy, Fuzzy Analytic Hierarchy Process (FAHP), human resources management, information and technology management, change management, knowledge management 1. Introduction The contemporary manufacturing organizations have been faced with major challenges in terms of two aspects. On the one hand, the new philosophies and technologies of manufacturing are emerging and this will cause the obsolescence of former practices. (Olfat, 273

2 2009) On the other hand, the customers have become emboldened in demands for new products and service in the short time (Ho, Lau, Lee & Ip, 2005). Nowadays, the agility is considered as a powerful competitive tool for all organizations in a changing and turbulent environment. The concept of agility is introduced by Iacocca Foundation researchers (1991) and has been taken into account by researchers and industrial communities after the first introduction. So far, numerous publications are produced for this subject in an attempt to provide a definition of agility. According to the common accepted definitions, the agility is the ability of organization to respond quickly and effectively to changes in market demand with the aim of finding the customer needs in terms of price, features, quality, quantity, and delivery. The agile companies quickly and effectively respond to changing markets. Furthermore, the agility affects the organizational capabilities for production and delivery of new products at productive cost. The reduced production costs, increased customer satisfaction, eliminated non-value added activities, and increased competition are among the advantages which can be achieved through the agility strategy. This identification of organizational capabilities to cope with the environmental changes and the effort to improve these capabilities by establishing the appropriate strategies are the first steps in achieving he desired level of agility. (Molavi, 2013) At the beginning of the twenty-first century, the world has been faced with major changes and challenges receiving from different directions to manufacturing organizations, and thus it has made taking the urgent measures in accordance with the new competitive environment inevitable for organizations. In this regard, the new system of production, called the agile manufacturing, has emerged in operations management with the same aim in recent years. (Crocitto & Youssef, 2003) Enabling the organization to respond quickly to demand changes is the extract of agility strategy. (Christopher, 2000) An agile organization quickly responds to the market demands according to the existing changes. (Ramesh & Devadasan, 2007) An agile organization should be able to identify the environmental changes and consider them as the agents of growth and development. Generally, the agile concepts consist of three main parts including the drivers, capabilities, and enablers of agility. The drivers are considered as the starting points of agility and are the factors which induce the achievement of agility. The agility capabilities are the necessary abilities to cope with the drivers, and the enablers are the factors which lead to the development and improvement of agility capabilities in the organization. (Zhang & Sharifi, 2007) The agility drivers are the business environment changes and pressures which enforce the organizations to review the strategy and modify or adjust it in order to take into serious account the agility (Hillegersberg, 2006). According to a classification introduced by Zhang & Sharifi, these capabilities cover seven main elements which are considered as the bases for maintaining and developing the agility. These elements are as follows: The accountability, competence, flexibility, speed, focus on customer, pre-action, and participation. The agility strategies include the IT and technology management, human resource management (HRM), knowledge management (KM), and change management (CM). (Zhang & Sharifi, 2007). 274 The agility approach, which has been proposed and developed in less than a decade, is an informed comprehensive response to the changing needs of competitive markets and

3 achievement of success in opportunities. Naturally, the organizations seek the effectiveness and this depends on the identification of environment as well as understanding the resulted effects in the environment and the necessary adjustments in mechanisms of monitoring and operational feedback. The custom production rather than the mass production is one of the natural-progressive response of organizations and the manufacturing and service companies have attracted to agility approach. (McDonald, 2002) The agility has two main parts: 1- Response to changes (unexpected and unpredicted) and 2- Utilization of changes and taking advantage of them as an opportunity. (Dove, 1993). Molavi (2013) provided a method for prioritizing the agility strategies using the TOPSIS technique and the Fuzzy Inference System (FIS). The obtained results of research indicate the superior role of information and technology management than other strategies in improving the agility of studied industry and accountability to its environmental needs. Abdollahi (2013) provided an upgraded model of organizational agility with an approach of Aligned Balanced Scorecard (BSC). In this paper, the Aligned Balanced Scorecard (BSC) is utilized to determine the perspectives in four dimensions in order to specify the strategy which is one of the dimensions of enablers in organizational agility model, and then the enablers of agility, which cause appropriate response to agility drivers, are improved, and finally the organization becomes more agile. Investigating the agility literature, interviews with industry managers and experimental surveys, Zhang & Sharifi (2007) introduced a primary conceptual model and designed a methodology for achieving the agility in manufacturing organizations. This conceptual model consists of three main principles as follows: The drivers, capabilities, and enablers of agility. Zhang & Sharifi (2000) have classified the enablers of agility into 4 categories of strategic capabilities as follows: - Accountability: The ability to identify the changes, respond quickly to them in the form of reaction or pre-action, and returning again to the appropriate mode against the changes. - Competence: This is the ability of an extensive list of capabilities which equips a company with the efficiency and effectiveness in achieving its goals. - Flexibility: The ability to perform different tasks and achieve different objectives with the same facilities. - Speed: The ability to perform tasks and operations in the shortest possible time. Each of these capabilities separately exist in studies by other researchers such as Giachetti, Martinez et al (2003), Christopher (2000), and Swafford et al (2006). Based on the classification above, these researchers have provided the scales for measuring the agility. According to the above-mentioned cases, the main research question is as follows: How are the agility strategies of organization prioritized by Fuzzy Analytic Hierarchy Process in hospital? 2. Materials and methods This research is applied in terms of objective and has the descriptive-analytical type according to the data analysis, and utilizes the survey method in terms of data collection method. Both library and survey methods are utilized for data collection in this research. The first stage includes the theoretical principles and research literature, and the background of studies conducted in this field as well as identification of factors affecting the 275

4 organizational agility through the library method. Utilizing the theoretical review, research background and literature, the second stage designs a questionnaire to achieve the research objectives and then the necessary data is collected by referring to required data. Therefore, the data collection tools of this study are summarized as follows: - Book - Relevant articles - Research projects - Questionnaire The statistical population of this study consists of the senior and junior managers in active hospitals of medical universities affiliated to the Ministry of Health and Medical Education in Tehran Province. According to the conducted studies, there are 506 senior and middle managers active at the medical universities affiliated to the Ministry of Health and Medical Education in Tehran Province. The sample size is determined equal to 218 according to Morgan Table. To ensure it, 230 questionnaires were designed and distributed among the statistical population. After collecting the questionnaires, 223 questionnaires had the capability of analysis. The descriptive statistics including the demographic data of statistical sample such as the frequency distribution tables, descriptive charts and etc are utilized for data analysis in this study, and also the inferential statistics through FAHP is used for weighting the options. The research model is as follows: 276 Figure 1. Research model

5 3. Findings 3-1- Ranking the indices of organizational agility In this section, we are seeking to rank and determine the importance factors of organizational agility indices through the Fuzzy Analytic Hierarchy Process (FAHP). The valuation of criteria is done through the pairwise comparison and giving the scores which are the triangular fuzzy numbers and indicate the priority or importance of two criteria. Therefore, the decision maker compares the indices and uses the triangular fuzzy numbers for pairwise comparison. Using the range of 1 to 9, the pairwise comparison matrix can be established in the form of triangular fuzzy numbers. In other words, the decision maker expresses his preferences by pairwise comparison of elements at each level with higher levels through the fuzzy method. AHP is the multi-criteria decision-making process and there are at least three different levels in each model, so that there the elements of each level are connected together. The "target" is the first level and is associated with the decision making purpose of processing model. The second level is related to the criteria and it investigates the most important criteria in which the decision making process are involved. The third level is related to the options in which the elements, which are selected and degreed according to the priority, are assigned. The fuzzy numbers corresponding to the preferences of pairwise comparisons are shown among the variables shown in the following table. Table 1. Fuzzy numbers corresponding to the preferences in the pairwise comparisons Linguistic expression to determine the priority Triangular fuzzy number Full (4, 4.5, 5) Extremely high (3.5, 4, 4.5) Very high (3, 3.5, 4) High (2.5, 3, 3.5) Relatively high (2, 2.5, 3) Relatively low (1.5, 2, 2.5) Low (1, 1.5, 2) Relatively equal (0.5, 1, 1.5) Equal (1, 1, 1) For introduction to Fuzzy Analytic Hierarchy Process, weighting the options from the perspective of one of the respondents is done step by step, and then the results of Expert Choice 11 are presented according to 5 respondents. First responder has completed the table for prioritizing the agility indices of organization in the questionnaire as follows: The way of converting the tables extracted from the questionnaire into the fuzzy matrices in AHP method is as follows. The following table shows weighting the factors by one of the respondents: 277

6 Table 2. Determining the importance of agility indices Agility indices Competence Accountability Speed Flexibility Competence Accountability Speed Flexibility It is observed that the data of triangle below (the elements under the main diagonal) is the reverse symmetry of data in triangle above (the elements above the main diagonal). For instance, the competence index is times more important than the accountability or the accountability is one-third important then the competence from the perspective of this respondent. Now, we should convert the numbers and elements of matrix to fuzzy numbers according to the equivalent in the table of "fuzzy numbers corresponding to priorities". Therefore, the pairwise comparison matrix of factors from the perspective of first respondent is according to the following fuzzy form: Table 3. Fuzzy pairwise comparison matrix for main factors from the perspective of first respondent Agility indices Competence Accountability Speed Flexibility Competence (1,1,1) (1, 1.5, 2) (1, 1.5, 2) (1.5, 2, 2.5) Accountability (0.5, 2.3, 1) (1,1,1) (0.5, 1, 1.5) (1, 1.5, 2) Speed (0.5, 2.3, 1) (2.3, 1, 2) (1,1,1) (1, 1.5, 2) Flexibility (0.4, 0.5, 2.3) (0.5, 2.3, 1) (0.5, 2.3, 1) (1,1,1) The relative and final weights should be calculated after preparing the pairwise comparison matrix (the respondents' preferences obtained from the questionnaire) in the fuzzy form. Various methods are provided by researchers for this purpose including the Extent Analysis Method by Chang and this research utilizes this method. First step) The SK value, which is a triangular fuzzy number, is calculated for each row of pairwise comparison matrix prepared as follows. After responding the tables of factor preferences by respondents, the coefficients of each pairwise comparison matrix are first calculated (sk). The sk value is a triangle number which is calculated as follows: S K n M * m n kj i1 i1 i1 M ij 1 (1) Where, K indicates the numbers of row and i and j are the options and criteria respectively. 278

7 Second step) After SK calculation in EA method, their magnitude degrees should be measured. Generally, if M1 and M2 are two triangular fuzzy numbers, the magnitude degree of M1 to M2, which is shown by V(M1 M2), is defined as follows: V( M1 M2) 1 M1 M2 Otherwise, V( M1 M2) hgt( M1 * M2) (2) Also we have: (3) hgt( m1 m2 ) ( u 1 u1 l2 l ) ( m 2 2 m ) 1 The magnitude of a triangular fuzzy number from k triangular fuzzy number is also obtained from the following equation: v( m 1 m2,..., mk ) mi v( m1 m2 ),..., v( m1 m k Third step) We calculates the weights of indices in pairwise comparison matrix in EA method as follows. v ( s s, k 1,2,..., n k i w ( x ) min, i i k v ( s s, k 1,2,..., n k i w ( x ) min, i w w c ), w( c ),..., w ( cn) ( 1 2 i k t And this is the vector of non-normed fuzzy AHP coefficients. Fourth step) The values obtained from in the previous step of non-normed weight are the criteria of hierarchy analysis table. Therefore, the normed weights of criteria (indices) are obtained from the following formula. (4) (5) (6) (7) 279

8 W j W i W i (8) w ( x, x, x,...) t The obtained weights are the relative importance coefficients for each index (criteria) based on fuzzy AHP (by EA method) and determine the best option of decision making from the decision making criteria. Table 4: Total row values of indices Agility indices Total row values of main factors Competence (4.5, 6, 7.5) Accountability (3, 4.16, 5.5) Speed (3.16, 4.16, 6) Flexibility (2.4, 2.82, 3.66) Sum (13.06, 17.14, 22.66) Sk calculation: Sk is calculated for each row of pairwise comparison matrix prepared according to the above-mentioned method: Calculating the magnitude of s compared to each other. 280

9 Calculating the weights of indices in pairwise comparison matrix: { } { } { } { } { } { } { } { } Finally, the non-normed weight vector of indices is as follows: [ ] (9) 1. Normalizing the weight vector obtained from the third step and measuring the weight vector of criteria. (10) Therefore, the final weight and prioritization of main four factors of SWOT matrix are according to the following tables from the perspective of a respondent and by FAHP method: Table 5. Prioritizing the indices of agility according to the FAHP method Index (criteria) Weight Priority Competence Accountability Speed Flexibility It is shown that the sum of importance coefficients is exactly equal to 1 indicating the full accuracy of calculations. 281

10 Expert Choice software output chart with respect to the final prioritization of agility indices for all respondents is as follows: Figure 2. Final prioritization of indices According to the output of software, the inconsistency rate is equal to 0.06, and since it is below 0.1, the reliability of data above is confirmed. According to the findings above, the final matrix for ranking the agility indices is as follows: (11) 3-2- Ranking the strategies based on the first criterion of organizational agility (competence) Like the previous steps, we rank the agility strategies on the basis of competence agility index in this step. The Expert choice software output is as follows: Figure 3. Ranking the strategies based on the first criterion of organizational agility (competence) 282

11 According to the software output, the inconsistence rate is equal to 0.09, and since the inconsistence rate is below, the reliability of data above is confirmed Ranking the strategies based on the second criterion of organizational agility (accountability) Figure 4. Ranking the strategies based on the second criterion of organizational agility (accountability) 3-4- Ranking the strategies based on the third criterion of organizational agility (speed) The output of Expert choice software for ranking the strategies based on the speed agility criterion is as follows: Figure 5. Ranking the strategies based on the third criterion of organizational agility (speed) 3-5- Ranking the strategies based on the fourth criterion of organizational agility (flexibility) The output of Expert choice software for ranking the strategies based on the flexibility agility criterion is as follows: 283

12 Figure 6. Ranking the strategies based on the fourth criterion of organizational agility (flexibility) 3-6- Final prioritization of organizational agility strategies based on each variable The above steps are summed up in the following table: Table 6. Prioritizing the strategies based on each criterion of agility Strategy criterion Competence Accountability Speed Flexibility Information and technology (IT) management Human resource Management (HRM) Knowledge management (KM) Change management (CM) Now, the prioritization of criteria or W matrix (final weight) for strategies is obtained based on four mentioned criteria by integrating and multiplying the obtained above matrix by final matrix. Finally, the final rank and weight are as follows: (12) 284

13 Table 7. Prioritization and final weight of organizational agility strategies Organizational agility strategies Information and technology management Human resource management Final weight Rank Knowledge management Change management According to the obtained results, the human resource management has obtained the first rank, and the second rank is given to the knowledge management, the third one to information technology management, and the fourth one to change management from the agility strategies of organization. 4- Conclusion The new needs of business environment always create the new competition ways which become inclusive depending on the theoretical strength and intensity of need in the organizations. The aim of this study is to identify and prioritize the organizational agility strategies. This research provides the scientific, precise and targeted infrastructure for mid-term and long-term planning in line with making the hospitals agile with the aim of improving the agility and preparing them for entry into the global markets. By development and implementation of programs, which promote the effective structures on agility, it can be hoped that the path towards the agility will be shorter and more reliable, and the correction of deviations from the program will be controllable more clearly. The agility is one the most important factors of survival and progress in companies in today's dynamic environment. The change and uncertainty is the basic characteristic of this environment. We should investigate how the companies should operate in such this environment in order to obtain the maximum benefit from the changes and develop while maintaining their situation in the environment. The management science has also been faced with the changes based on this principle. Either in public or private sector, the management is responsible for proper utilization of production factors in line with three goals, the organization, employees and government. Therefore, playing the role of management is very complex and difficult in this era. According to the obtained results, the human resource management strategy is the most efficient strategy in the field of agility strategies of organization. The managers' lack of familiarity and belief in incredible important elements such as the employment, training and performance evaluation in this area is the main cause of failure in human resource measures in local organizations and particularly the hospitals. The implementation of favoritism instead of criteria, the lack of meritocracy, the inefficient education, and lack of payment system based on the performance are the other causes which have weakened this field according to the experts. The managers' failure to 285

14 develop and implement the programs based on the strategy is the most important factor in insignificant relationship between this structure and agility structure. On the other hand, the companies, which have developed the systematic strategy, think less about the evaluation and review of their strategies while facing with the extensive current turbulence of market and economy. In this regard, the more they adhere to implementation of developed strategies, the less they achieve positive results. According to the study by Tseng et al (2011), from twelve considered enablers, the human resource management is known as the most important enablers of agility, and the results of this study are consistent with this finding. An organization has essentially a collection of elegance to respond to the changes in the environment. The agile hospital is concerned more about the change, uncertainty and unpredictability of environment and tries to show the correct response in this situation. Therefore, the agile organization needs the existing potential capacities and adaption for facing with these changes and uncertainty in the environment. These capabilities include 4 major elements. The accountability is the ability of identifying the changes and responding quickly to them in order to solve them. The competence is the ability to achieve effectively the goals and missions of organization. The flexibility is the ability to process different processes and achieve various objectives with the same features. The speed is the ability to perform tasks in the shortest possible time. Using these 4 principles, a methodology is created for combining them in the form of a relevant and integrated system. According to the obtained results, the competence is the most important criterion of organizational agility. Therefore, it can be concluded that the enrichment and development of job as well as the self-decision-making will create the agility for employees. 286

15 References: 1. Olfat, Laya; Zanjirchi, Seyed-Mahmoud (2009), A model for organizational agility in the electronics industry of Iran; Quarterly Journal of Management Sciences in Iran, Issue 13, Spring 2009, pp Molavi, Behnam; Esmaeilian, Majid; Ansari, Reza (2013) Providing a method for prioritizing the agility strategies of organization using TOPSIS technique and Fuzzy Inference System (FIS); Industrial Management, Vol. 5, No. 1, Spring and Summer. 3. Christopher, M.G. (2000). The agile supply chain: competing in volatile markets. Industrial Marketing Management 29(1), Christopher, M.G. (2000). The agile supply chain: competing in volatile markets. Industrial Marketing Management 29(1), Dove R. Lean and Agile: Synergy, Contrast, and Emerging Structure. Paper Presented at the Proceedings of Defense Manufacturing Conference Giachetti, R.E., Martinez, L.D., Saenz, O.A. & Chen, C.S. (2003). Analysis of the structural measures of flexibility & agility using a measurement theoretical framework. International Journal of Production Economics 86 (1), Hillegersberg, J.V., Oosterhout, M.V. & Waarts, E. (2006). Change factors requiring agility and implications for IT. European Journal of Information Systems, 15, Ho, G.T.S., Lau, H.C.W., Lee, C.K.M. & Ip, A.W.H. (2005). An intelligent forward quality enhancement system to achieve product customization. Industrial Management & Data Systems, 105(3), Mcdonald R, Ho MD. Principles and Practice in Reporting Structural Equation Modeling. Psychological Report 2002; 7(1): Ramesh, G. & Devadasan, S.R. (2007). Literature review on the agile manufacturing criteria, Journal of Manufacturing Technology Management 18(2), Swafford, P.M., Ghosh, S. & Murthy, N.N. (2006). A framework for assessing value chain agility. International Journal of Operations &Production Management 26(2), Zhang, D.Z. & Sharifi, H. (2007). Towards theory building in agile manufacturing strategy -a taxonomical approach. IEEE Transactions on Engineering Management, 54(2),